Here is a reenactment of how UBS CEO Oswald Gruebel reacted when he learned about the $2 billion fraud. (That is Colin Firth portraying Gruebel on the left.) http://www.youtube.com/watch%3Fv%3DxJvGE7Vvd4M
A headline today on CBC.ca reads “UBS case latest failure of risk management”. I think I will spend the rest of the day being offended by the CBC. (All will be forgiven if Amanda Lang appears on the National tonight.) Despite all the systems, oversight, controls, compliance, supervision and some other sixth thing, you can’t stop the rogue trader. Adoboli is to blame. His boss is to blame. Maybe culture or performance objectives are to blame. But risk management is not. Saying Risk Management is to blame is like saying the police department should be blamed for a teen committing…
The author of this article in Business World, Roderick M. Vega, describes fraud risk management as a sub-branch of enterprise risk management and lists the three major categories of fraud as fraudulent statements, asset misappropriation, and corruption. Like an ERM program, he explains “Simply conducting a fraud risk assessment does not get the job done and management must be prepared and committed to act on the results. The next critical step would be to identify controls that will prevent, deter or detect the identified fraud risks.” While this is a pretty good article about fraud risk, don’t be fooled into…
My favourite financial fraud of all time has to the work of John M. Rusnak at Allfirst Bank, a sub of Allied Irish Bank, perpetrated in 2001. Following the events which cost this Irish bank tens of millions of losses, an audit report was prepared by Promontory Financial Group and Wachtell, Lipton, Rosen & Katz. I love this audit report. It describes in brilliant detail the failures and lack of controls throughout the Maryland Bank. It is well written, hardly boring and entertaining. Anyone looking to do a quick and dirty audit of their back office operations merely has to…
